MasterCard Canada’s recent announcement that it will increase merchants’ transaction fees on credit card payments this summer is just the latest ripple in the tidal wave hitting the Canadian payment landscape over the past three years.

“If it was this fee alone we probably wouldn’t be reacting so strongly, but unfortunately fees in Canada have gone up 30% to 40% on average across the board because of the issuance of premium cards,” says Dan Kelly, CEO and president of the Canadian Federation of Independent Business. Canadian merchants pay more than $5 billion in credit card acceptance fees each year.

The notice of the MasterCard increase comes just months after Visa announced its own increase. Both were announced during the gap between closing arguments and a ruling in the Canadian Competition Tribunal’s case over the credit card companies’ use of “merchant restraints.” The case began in 2010 and a decision is expected any day.

Under the restraints, merchants who accept one card from a company must accept all that company’s cards. Premium cards and cards that give consumers extra points cost merchants more to process. Though the largest part of the fee goes to the card’s issuing bank, the competition commissioner alleges that the credit card companies set the fees, which can equal 1.5% to 4% of the final bill. For businesses with tight margins, credit card processing fees can eat up the total profit on a transaction. The restraints also disallow merchants to add a surcharge to bills paid with a high fee card.

This wouldn’t be the first ruling against the credit card giants. In November, a US $6 billion class action suit settlement gave some retailers the right to add surcharges to reimburse transaction fees. Australia, New Zealand and various European countries also allow surcharging.

MasterCard declined to comment for this story and Visa provided a statement by email which read: “Visa’s no-surcharge and honour all cards protections preserve consumer choice at checkout and ensure cardholders are not unfairly penalized for using their preferred form of payment.” The statement also quoted a 2011 Consumers’ Association of Canada survey that found 84% of consumers oppose merchant surcharges on credit card payments, a number that rings true for Kelly.

“Merchants would be loath to use these powers because smaller merchants don’t have the clout,” he says. No business owner wants to do the work of bringing a customer into his store and up to his cash register only to upset him with a credit card surcharge on his bill, Kelly adds. He believes that striking down the merchant restraints will cause the credit card companies to think twice about fee increases.

The Tribunal’s decision isn’t the only move against credit card companies coming out of Canada. The Senate is expected to discuss Bill S-215, An Act to Amend the Credit Card Payments Act, later this month. The bill, introduced by New Brunswick Senator Pierrette Ringuette, proposes capping the fees charged by Visa and MasterCard.